Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

You are here: Home / Archives for Michael Wolgin

Michael Wolgin

Second Circuit Affirms Denial of Arbitration in Case Involving Misappropriation of Trade Secrets

by

Medidata brought suit against its competitor, Veeva, alleging that Medidata’s former employees, who eventually left the company to work for Veeva, violated their employment agreements which required them to protect Medidata’s confidential information and to refrain from competing with Medidata during their employment there and for up to one year thereafter. Specifically, Medidata alleged that the former employees misappropriated Medidata’s trade secrets and other confidential information. Three of the five former employees’ agreements included an arbitration clause that mandated arbitration of “any dispute or controversy arising out of or relating to” their agreements. Veeva urged the court to compel arbitration based on the former employees’ arbitration agreements under a theory of equitable estoppel.

The district court denied the motion, and on appeal, the issue was whether Veeva demonstrated the requisite “relationship among the parties” that would make it unfair to decline to require arbitration of this dispute. The Second Circuit, in a summary order, affirmed, reasoning that no such relationship existed: “Veeva was not involved at all in those relationships until it intruded by allegedly poaching Medidata employees and inducing them to divulge Medidata’s secrets; in other words, by ‘wrongfully inducing’ the former employees to breach their contract with Medidata.” As such, because Veeva was in no such relationship at the time the arbitration agreements were signed, no equitable estoppel justification existed to compel arbitration. Medidata Solutions Inc., et al. v. Veeva Systems Inc., Case Nos. 17-2694(L) & 18-681(CON) (2d Cir. Sept. 6, 2018).

This post written by Gail Jankowski.

See our disclaimer.

Data Breach Bill Applicable to Reinsurers Heads to Floor of Us House of Representatives

by

The “Consumer Information Notification Requirement Act” (H.R. 6743) was passed out of the House of Representatives Committee on Financial Services one week after being introduced and is now headed to the floor for consideration by the full chamber. The bill, which amends the Gramm-Leach-Bliley Act to provide a national standard for financial institution data security and breach notification, expressly applies to reinsurers. The bill, however, does not in its current form address its application to reinsurers domiciled outside the United States. It requires reinsurers to provide a “breach notice” to the state insurance authority of the reinsurer’s domicile state “in the event of unauthorized access that is reasonably likely to result in identity theft, fraud, or economic loss.” The bill also requires the state insurance authority of the reinsurer’s domicile to enforce standards related to data security safeguards. The bill preempts states from enacting any data protection-related requirements for insurers that are in addition to or different from those described in the bill. The bill is opposed by the NAIC, among others. We will track the progress of this bill and post on any further legislative action. H.R. 6743, “Consumer Information Notification Requirement Act.”

This post written by Benjamin E. Stearns.

See our disclaimer.

Eighth Circuit Upholds Confirmation of Arbitration Award Directing Payment of Attorney’s Fees and Expenses Unrestricted by Contractual Limit on Liability

by

In a case concerning a contract for the construction of a pipe conveyor system, ProEnergy Services, LLC, and its surety Western Surety Company (collectively, “ProEnergy”), appealed a judgment confirming an arbitration award that included payment of attorneys’ fees and expenses to Beumer Corporation and Beumer Kansas City, LLC (collectively, “Beumer”). ProEnergy appealed, specifically questioning the arbitrator’s conclusion that the contract’s limitation on liability did not extend to attorney’s fees, and that an award of damages plus attorneys’ fees could exceed the cap.

The Eight Circuit affirmed the district court’s confirmation, concluding that the arbitrator acted within the scope of his authority and did not, as ProEnergy argued, “specifically and expressly disregard[] an unequivocal choice-of-law provision.” Instead, the court found that the arbitrator cited applicable Missouri law throughout his order, and moreover, reasoned that even “[i]f the arbitrator mistakenly overlooked Missouri decisions that favored a contrary result, then he might have made an error of law in applying the contract, but such an error of law does not justify vacating the award.” As such, the Eighth Circuit affirmed. Beumer Corp. v. ProEnergy Servs., LLC, Case No. 17-2862 (8th Cir. Aug. 8, 2018).

This post written by Gail Jankowski.

See our disclaimer.

New Mexico Adopts NAIC Credit for Reinsurance Model Regulation

by

Effective July 24, 2018, New Mexico adopted the NAIC Credit for Reinsurance Model Regulation. New Mexico adopted the Model Rule as “part of a broad effort to modernize reinsurance regulation and to conform with the Nonadmitted and Reinsurance Reform Act component of Dodd-Frank.” The new rule is codified in the New Mexico Administrative Code at 13.2.8 NMAC – Insurance Company Licensing and Operation – Credit for Reinsurance. The Notice of Proposed Rulemaking and the now-adopted rule is linked here.

This post written by Benjamin E. Stearns.

See our disclaimer.

Delaware Bankruptcy Court Confirms Restructuring Plan Involving Scottish Re

by

A Chapter 11 restructuring plan involving various affiliates of Scottish Re, each of which separately declared bankruptcy in different jurisdictions, was recently approved by a bankruptcy court in Delaware. The finalization of the plan depended on coordination among: (1) Scottish Holdings Inc. (“SHI”), (2) Scottish Re: Group, LTD., SHI’s parent company, (3) Scottish Annuity & Life Insurance Co. Ltd. (“SALIC”), an indirect debtor subsidiary, and (4) Scottish Financial Luxembourg (“SFL”), a financing entity. Prior to the approval of the plan, the receiver for SFL, which asserted an unsecured, nonpriority claim against SALIC in the amount of $63,536,041.32 for a debenture assigned from Scottish Re, stipulated with SHI that any potential claims against certain current or former members of the board of managers for SFL would be preserved. The stipulation and the restructuring plan was then approved. In re Scottish Holdings Inc. et al., Case No. 18- 10160 (U.S. Bankr. Ct. Del. Aug. 22, 2018).

This post written by Gail Jankowski.

See our disclaimer.